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Technical Efficiency and the Role of ICT: A Comparison of Developed and Developing Countries

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  • Sophia P. Dimelis
  • Sotiris K. Papaioannou

Abstract

This paper investigates for possible effects of information and communication technology (ICT) in reducing aggregate technical inefficiency. A translog stochastic production frontier is simultaneously estimated with a technical inefficiency model across a panel of forty-two countries in 1993-2001. Strong evidence is provided for a significant impact of ICT in reducing country inefficiencies. Further evidence indicates a significantly positive ICT impact on labor productivity, while it seems that a substitute relationship between ICT and non-ICT capital exists. Based on the model's estimates, the most efficient country in the sample is the United States, followed by India, and a number of other developed countries. Overall, developed countries operate closer to the world frontier.

Suggested Citation

  • Sophia P. Dimelis & Sotiris K. Papaioannou, 2011. "Technical Efficiency and the Role of ICT: A Comparison of Developed and Developing Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 40-53, July.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:0:p:40-53
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